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Derivative Activities | 3 Months Ended
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Mar. 31, 2020
Derivative Instruments And Hedging Activities Disclosure [Abstract] |
Derivative Activities | (11) DERIVATIVE ACTIVITIES We use commodity-based derivative contracts to manage exposure to commodity price fluctuations. We do not enter into these arrangements for speculative or trading purposes. We utilize commodity swaps, collars, three-way collars, calls or swaptions to (1) reduce the effect of price volatility of the commodities we produce and sell and (2) support our annual capital budget and expenditure plans. The fair value of our derivative contracts, represented by the estimated amount that would be realized upon termination, based on a comparison of the contract price and a reference price, generally the New York Mercantile Exchange (“NYMEX”) for natural gas and crude oil or Mont Belvieu for NGLs, approximated a net gain of $256.0 million at March 31, 2020. These contracts expire monthly through December 2021. The following table sets forth our commodity-based derivative volumes by year as of March 31, 2020, excluding our basis and freight swaps which are discussed separately below:
Period |  | Contract Type |  | Volume Hedged |  | Weighted Average Hedge Price
|  |  |  |  |  | Swap |  | Sold Put |  | Floor |  | Ceiling
Natural Gas |  |  |  |  |  |  |  |  |  |  |  |  |
2020 |  | Swaps |  | 1,155,600 Mmbtu/day |  | $ | 2.57 (1) |  |  |  |  |  |
2021 |  | Swaps |  | 50,000 Mmbtu/day |  | $ | 2.62 (1) |  |  |  |  |  |
April – June 2020 |  | Calls |  | 40,000 Mmbtu/day |  | $ | 2.30 |  |  |  |  |  |
April – October 2020 |  | Three-way Collars |  | 20,000 Mmbtu/day |  |  |  |  | $ 1.75 |  | $ 2.00 |  | $ 2.50
2021 |  | Three-way Collars |  | 240,000 Mmbtu/day |  |  |  |  | $ 1.99 |  | $ 2.31 |  | $ 2.60
Crude Oil |  |  |  |  |  |  |  |  |  |  |  |  |
2020 |  | Swaps |  | 7,331 bbls/day |  | $ | 58.22 (1) |  |  |  |  |  |
2021 |  | Swaps |  | 1,000 bbls/day |  | $ | 55.00 (1) |  |  |  |  |  |
April – September 2020 |  | Calls |  | 500 bbls/day |  | $ | 59.00 |  |  |  |  |  |
NGLs (C3-Propane) |  |  |  |  |  |  |  |  |  |  |  |  |
April – June 2020 |  | Swaps |  | 8,242 bbls/day |  | $ | 0.63/gallon |  |  |  |  |  |
NGLs (NC4-Normal Butane) |  |  |  |  |  |  |  |  |  |  |  |  |
April – September 2020 |  | Swaps |  | 2,913 bbls/day |  | $ | 0.57/gallon |  |  |  |  |  |
April – September 2020 |  | Calls |  | 2,251 bbls/day |  | $ | 0.57/gallon |  |  |  |  |  |
NGLs (iC4-Isobutane) |  |  |  |  |  |  |  |  |  |  |  |  |
April 2020 |  | Swaps |  | 2,000 bbls/day |  | $ | 0.64/gallon |  |  |  |  |  |
NGLs (C5-Natural Gasoline) |  |  |  |  |  |  |  |  |  |  |  |  |
April 2020 |  | Swaps |  | 1,500 bbls/day |  | $ | 1.21/gallon |  |  |  |  |  |
(1) | We also sold natural gas call swaptions of 120,000 Mmbtu/day for July – December 2020 at a weighted average price of $2.51 and 100,000 Mmbtu/day for 2021 at a weighted average price of $2.69. In addition, we sold oil call swaptions of 3,000 bbls per day for 2021 at a weighted average price of $56.50.
Every derivative instrument is required to be recorded on the balance sheet as either an asset or a liability measured at its fair value. We recognize all changes in fair value of these derivatives as earnings in derivative fair value income or loss in the periods in which they occur. Basis Swap Contracts In addition to the swaps, collars, calls and swaptions described above, at March 31, 2020, we had natural gas basis swap contracts which lock in the differential between NYMEX Henry Hub and certain of our physical pricing indices. These contracts settle monthly through December 2021, monthly in 2023 and 2024 and include a total volume of 125,180,000 Mmbtu. The fair value of these contracts was a gain of $4.8 million at March 31, 2020. At March 31, 2020, we also had propane spread swap contracts which lock in the differential between Mont Belvieu and international propane indices. The contracts settle monthly in 2020 and include a total volume of 1,500,000 barrels. The fair value of these contracts was a gain of $651,000 at March 31, 2020. Freight Swap Contracts In connection with our international propane sales, we utilize propane swaps. To further hedge our propane price, at March 31, 2020, we had freight swap contracts on the Baltic Exchange which lock in the freight rate for a specific trade route. These contracts settle monthly through December 2021 with the fair value of these contracts equal to a loss of $4.7 million at March 31, 2020. Derivative Assets and Liabilities The combined fair value of derivatives included in the accompanying consolidated balance sheets as of March 31, 2020 and December 31, 2019 is summarized below. The assets and liabilities are netted where derivatives with both gain and loss positions are held by a single counterparty and we have master netting arrangements. The tables below provide additional information relating to our master netting arrangements with our derivative counterparties (in thousands):
|  |  | March 31, 2020 |
|  |  | Gross Amounts of Recognized Assets |  |  | Gross Amounts Offset in the Balance Sheet |  |  | Net Amounts of Assets Presented in the Balance Sheet |
Derivative assets: |  |  |  |  |  |  |  |  |  |  |  |  |
Natural gas | –swaps |  | $ | 192,244 |  |  | $ | (448 | ) |  | $ | 191,796 |
| –swaptions |  |  | — |  |  |  | (3,719 | ) |  |  | (3,719 | )
| –calls |  |  | — |  |  |  | (23 | ) |  |  | (23 | )
| –three-way collars |  |  | 1,914 |  |  |  | (8,612 | ) |  |  | (6,698 | )
| –basis swaps |  |  | 5,597 |  |  |  | (436 | ) |  |  | 5,161 |
Crude oil | –swaps |  |  | 67,765 |  |  |  | (4,024 | ) |  |  | 63,741 |
| –swaptions |  |  | — |  |  |  | (11 | ) |  |  | (11 | )
| –calls |  |  | — |  |  |  | (6 | ) |  |  | (6 | )
NGLs | –C3 propane spread swaps |  |  | 23,039 |  |  |  | (22,388 | ) |  |  | 651 |
| –C3 propane swaps |  |  | 8,753 |  |  |  | — |  |  |  | 8,753 |
| –iC4 iso butane swaps |  |  | 673 |  |  |  | — |  |  |  | 673 |
| –NC4 normal butane swaps |  |  | 5,046 |  |  |  | — |  |  |  | 5,046 |
| –NC4 normal butane calls |  |  | — |  |  |  | (44 | ) |  |  | (44 | )
| −C5 natural gasoline swaps |  |  | 1,589 |  |  |  | — |  |  |  | 1,589 |
Freight | −swaps |  |  | — |  |  |  | (3,354 | ) |  |  | (3,354 | )
|  |  | $ | 306,620 |  |  | $ | (43,065 | ) |  | $ | 263,555 |
|  |  | March 31, 2020 |
|  |  | Gross Amounts of Recognized (Liabilities) |  |  | Gross Amounts Offset in the Balance Sheet |  |  | Net Amounts of (Liabilities) Presented in the Balance Sheet |
Derivative (liabilities): |  |  |  |  |  |  |  |  |  |  |  |  |
Natural gas | –swaps |  | $ | (448 | ) |  | $ | 448 |  |  | $ | — |
| –swaptions |  |  | (4,171 | ) |  |  | 3,719 |  |  |  | (452 | )
| –calls |  |  | (23 | ) |  |  | 23 |  |  |  | — |
| –three-way collars |  |  | (13,276 | ) |  |  | 8,612 |  |  |  | (4,664 | )
| –basis swaps |  |  | (777 | ) |  |  | 436 |  |  |  | (341 | )
Crude oil | –swaps |  |  | (4,024 | ) |  |  | 4,024 |  |  |  | — |
| –swaptions |  |  | (11 | ) |  |  | 11 |  |  |  | — |
| –calls |  |  | (6 | ) |  |  | 6 |  |  |  | — |
NGLs | –C3 propane spread swaps |  |  | (22,388 | ) |  |  | 22,388 |  |  |  | — |
| –NC4 normal butane calls |  |  | (44 | ) |  |  | 44 |  |  |  | — |
Freight | –swaps |  |  | (4,720 | ) |  |  | 3,354 |  |  |  | (1,366 | )
|  |  | $ | (49,888 | ) |  | $ | 43,065 |  |  | $ | (6,823 | )
|  |  | December 31, 2019 |
|  |  | Gross Amounts of Recognized Assets |  |  | Gross Amounts Offset in the Balance Sheet |  |  | Net Amounts of Assets Presented in the Balance Sheet |
Derivative assets: |  |  |  |  |  |  |  |  |  |  |  |  |
Natural gas | –swaps |  | $ | 134,364 |  |  | $ | (2,913 | ) |  | $ | 131,451 |
| –swaptions |  |  | — |  |  |  | (1,325 | ) |  |  | (1,325 | )
| –basis swaps |  |  | 10,766 |  |  |  | (1,092 | ) |  |  | 9,674 |
Crude oil | –swaps |  |  | 3,893 |  |  |  | (4,794 | ) |  |  | (901 | )
| –swaptions |  |  | — |  |  |  | (1,597 | ) |  |  | (1,597 | )
| –calls |  |  | — |  |  |  | (349 | ) |  |  | (349 | )
NGLs | –C3 propane spread swaps |  |  | 1,913 |  |  |  | (1,913 | ) |  |  | — |
| –NC4 butane swaps |  |  | 167 |  |  |  | — |  |  |  | 167 |
| –C5 natural gasoline swaps |  |  | 60 |  |  |  | (127 | ) |  |  | (67 | )
Freight | –swaps |  |  | 1,529 |  |  |  | (1,028 | ) |  |  | 501 |
|  |  | $ | 152,692 |  |  | $ | (15,138 | ) |  | $ | 137,554 |
|  |  | December 31, 2019 |
|  |  | Gross Amounts of Recognized (Liabilities) |  |  | Gross Amounts Offset in the Balance Sheet |  |  | Net Amounts of (Liabilities) Presented in the Balance Sheet |
Derivative (liabilities): |  |  |  |  |  |  |  |  |  |  |  |  |
Natural gas | –swaps |  | $ | (1,657 | ) |  | $ | 2,913 |  |  | $ | 1,256 |
| –swaptions |  |  | (2,594 | ) |  |  | 1,325 |  |  |  | (1,269 | )
| –basis swaps |  |  | (1,371 | ) |  |  | 1,092 |  |  |  | (279 | )
Crude oil | –swaps |  |  | (4,814 | ) |  |  | 4,794 |  |  |  | (20 | )
| –swaptions |  |  | (2,254 | ) |  |  | 1,597 |  |  |  | (657 | )
| –calls |  |  | (349 | ) |  |  | 349 |  |  |  | — |
NGLs | –C3 propane spread swaps |  |  | (16,040 | ) |  |  | 1,913 |  |  |  | (14,127 | )
| –C5 natural gasoline swaps |  |  | (127 | ) |  |  | 127 |  |  |  | — |
Freight | –swaps |  |  | — |  |  |  | 1,028 |  |  |  | 1,028 |
|  |  | $ | (29,206 | ) |  | $ | 15,138 |  |  | $ | (14,068 | )
The effects of our derivatives on our consolidated statements of operations are summarized below (in thousands):
|  | Derivative Fair Value Income (Loss) |  |
|  | Three Months Ended March 31, |  |
| 2020 |  |  |  | 2019 |  |
Commodity swaps | $ | 228,354 |  |  | $ | (57,418 | ) |
Swaptions |  | 666 |  |  |  | (3,291 | ) |
Three-way collars |  | (11,362 | ) |  |  | — |  |
Collars |  | — |  |  |  | (4,524 | ) |
Calls |  | 275 |  |  |  | — |  |
Basis swaps |  | 21,343 |  |  |  | 3,415 |  |
Freight swaps |  | (6,101 | ) |  |  | 87 |  |
Total | $ | 233,175 |  |  | $ | (61,731 | ) |

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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